While theEurope takes steps forward to renegotiate its internal rules, starting with the Stability Pact, another dossier is hot these days: that of the historic free trade agreement with the Mercosur, that is, with the economic union of South America. An agreement that has been under discussion for 20 years, which involves almost 1 billion people and 25% of global GDP, and which finally seemed to be in the home stretch before yet another setback. Brussels officially insists that for its part "the agreement will be closed as soon as possible", but in reality there is a real chess game underway with the French president Emmanuel Macron who from the COP28 in Dubai made it known that he was perplexed if not against it, while in Berlin the German chancellor Olaf Scholz received the Brazilian president Squid and both were pushing for the signature. Signature that at a certain point was in the air: last Thursday at the Mercosur summit in Rio de Janeiro, the last one chaired by Lula (from January it will be Paraguay's turn), Ursula Von der Leyen and Valdis Dombrovskis were initially expected, probably to give the official announcement. Instead, nothing further was done about it: the President of the Commission and the Commissioner for Trade remained at home.
EU-Mercosur: Europe is holding back on the agreement but South America is also divided internally
The truth is that South America itself is secretive and divided. Suffice it to say that on the one hand Lula is being a "dove" and would have liked to close the matter by taking advantage of the rotating presidency of Mercosur, on the other hand he has raised quite a few doubts about an agreement which to some members of his party and his government seems like a trap, to the point of saying, during the Rio summit, that "Europe has treated us like inferior countries, I would almost say like colonized countries". The agreement would therefore be suitable, in the opinion of many economists and the South American press, almost only for Europe, which would thus have agile access to the very rich supply of raw materials, including those decisive for the energy transition such as lithium and rare metals, managing so as not to be cut off from the duopoly of the USA and China, which have long been competing for commercial supremacy in the Latin American area. For the European Union, the one with Mercosur would be the second most important trade agreement after the one signed in 2019 with Japan, and Romano Prodi also spoke on the topic in recent days, who from Buenos Aires for an event linked to the University of Bologna said: “There is a lack of systemic and global negotiation between Europe and Latin America. With elections always around the corner, governments are not making long-term decisions”, referring to the Argentine vote which confirmed the victory of the outsider Javier Milei, one of the reasons that prevented the signature expected in Rio.
. Mercosur: Milei's election has shifted the needle
Without a doubt, Milei's election shifted the balance in favor of saying no to the agreement, but in the previous months Uruguay had already gone on its own by signing an important bilateral agreement with China. And Brazil itself, while recognizing an improvement in the latest text presented this year by Von der Leyen, was never entirely convinced. If on the European side the doubts are mostly about the reciprocity of rules requested by Scholz and above all by Macron ("An agreement is not possible if they do not respect the Paris agreements and if they do not respect the same environmental and health constraints that we impose on our producers"), on the South American side the issue is also another: that of the so-called national quotas, i.e. the possibility of locking down a part of the resources to reindustrialise the region, and thus making ourselves less dependent on technological products imported from Europe. To overcome this obstacle, as well as that of the sanctions for products obtained from deforestation of the Amazon (added with a side-letter, i.e. an annexed text wanted by Brussels), there are those who argue that the agreement could be split, referring to date to be set for the discussion on the aspects not shared. As regards the green sanctions, it was Brazil that was particularly disliked, having spoken of a "unilateral decision", which in such a short period would damage agribusiness, which supports the country's economy.
The Commission then sought a point of agreement, recalling that in reality Europe has already been discouraging the import of raw materials or finished products contrary to environmental protection for some time, and that from 2024 these sanctions - already in place, regardless from the overall agreement – would simply be extended to other categories of goods. This is the reason for Macron's words: if on the one hand this formula can penalize the exports of countries like Brazil, on the other hand European companies ask that green paradigms be respected by everyone, otherwise the game is not played on the same field and with the same rules. In South America, however, there are also those who contest the very basis of the agreement, i.e. to free approximately 90% of products entering and leaving Europe and South America from trade duties: some economists point out that the continent of the southern hemisphere currently applies on average much higher than the European ones, and would therefore lose more by eliminating them. The game is wide open, and in the background they are competing against the USA and – above all – China.
